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What Will It Cost?

Okay, today’s blog is for the high school students about to get out into the world. Everyone dreams of the day when they will be able to get out on their own, but unfortunately, many do not realize what it takes to make that a reality. It takes a lot, more than most realize.

For those who want to live on their own, it is going to take money – quite a bit of money. In fact, if you are straight out of high school, you might not be able to make enough to be on your own. (This was where the idea of roommates was born.)

Many high school students are unaware of how much it will cost to live on their own in the world while making sure their bills are paid. This excerpt from PSST! Wanna Know a Secret? might give some of you who are getting ready to leave your parents’ homes some idea of what will be required as income to get out there on your own.

From Chapter 6 of the book…

Chapter 6 – Your budget

So, how much do you think it will really cost to live? Have you given thought to how much your parents have been paying on your behalf for your past existence on the planet? In Chapter 4, I touched only on the basics. Now, let’s throw in some real numbers.

Most recent high school graduates have little knowledge and less experience regarding finances and budget planning. Consequently, when they get out on their own, most are shocked by how much money it takes just to live.

Here is a list of the things you should consider in developing your budget:

Food – no matter what, you have to eat

Housing – got to have a place to sleep

Electricity – got to have the buzz

Savings – should be paid first

Telephone – must be able to talk

Water – the magical fluid of life

Garbage – someone has to take out the trash

Sewerage – sometimes included with water bill

Other bills – stuff like credit cards

Car payment – could be big or small, even $0

Car insurance – this will be huge

Gas – this can also be big

Car maintenance – depends on car’s age

Clothing – more for girls, less for boys

Dining out – everyone needs to go out occasionally

Entertainment – goes along with dining out

Now that you know a little about what you will spend your money on, let’s throw some realistic numbers in the plan and see what the real bottom line might be. Food will cost $300; Housing $800; Electricity $125; Savings; $150; Telephone $90; Water $50; Garbage $30; Sewerage $15; Other bills $150; Car payment $225; Car insurance; $300; Gas $200; Maintenance $40; Clothing $100; Dining out $50; and Entertainment $50. All of this totals $2675.

The total of $2,675 amounts to more than $32,100 for the year. Any which way you cut it, life expenses are costly. Especially if you want to live a lifestyle including anything more than the basics. (Notice that I bumped up the savings on this budget.)

Oh yes, don’t forget you have to make enough money to pay the taxes on the $32,100 cost of living. This will be about $3600. So, just to get by, you are looking at a minimum income of $35,700, or almost $3000 per month.

To make this much money on an hourly job, your rate has to be $17.16 per hour. That is without overtime. This is to say that if you go in on a Monday through Friday job and you punch the clock for a 40-hour workweek, the equation will look like this:

40 hours X 52 weeks =

2,080 hours X $17.16 = $35,700.

This will equal $2975 per month, or $687 per week, or ($32,100/365=) $97.81 per day, each day of the year.

That’s a lot of money. And yet, it is not.

The questions you need to ask are: Can you make that much money? Can you command that level of a salary? What about raises later?

If you cannot make $36k a year, the next question you need to ask is how can you make up the difference? What other options do you have for making money?

Here’s one: How about buying a house? And then acquiring enough roommates to cover the cost of the mortgage. And maybe the utilities.

For example, if you were to acquire a modest three-bedroom house with a mortgage of about $1000 a month with utilities averaging $200, your total cash required would be $1200 each month. With two roommates paying $600 a month for the rent of one bedroom and $50 a month for electricity, your income would be $1300 a month.

After you pay the mortgage and utilities, you will be $100 to the good for the month. Another way look at this is to realize you are making $1200 a year while saving $10,800 a year for not paying rent on a one-bedroom apartment and the associated utilities.

You have to do your research on this idea, however. Some localities have either city ordinances or HOA rules about more than two non-related people living in the same house. Again, do your homework.

Could you imagine living rent-free for three years? By saving $1000 a month for rent and utilities, a very smart and enterprising young person could bank more than $36,000 during those three years.

If you were to invest wisely, there would be no telling how much interest it could earn over those three years. If you are disciplined and deposited $1000 a month into an account each month for three years, at possibly 2.5 percent, the deposits will grow to a total of $37,400. Invested wisely in the market, you may be able to see a return perhaps as high as 17 percent in riskier options. The total might grow to perhaps $46,000 or more. (See Chapter 9.)